At a glance
TAXF charges 0.27% a year, below the 0.34% average of the 7 funds most like it (the 4th cheapest of 8). It has $683.8M in assets, the 8th largest of that group; it paid 3.95% of its price in distributions over the past 12 months, monthly. Over the past year it returned −0.4% with distributions reinvested, 6th of those 8 funds; over three years it returned +4.6% a year. At its worst it fell 13.4% in the 2020 crash (S&P 500: 33.7%) and 12.7% in the 2022 bear market (S&P 500: 24.5%), and was back at its earlier high 8 months and 24 months after the lows. Its ten largest positions make up 6.3% of the fund, out of 791 in all.
The short version
American Century Diversified Municipal Bond ETF (TAXF) is an actively managed fund that buys municipal bonds, which are bonds issued by states, cities and public agencies, whose interest is generally exempt from federal income tax. Its managers pick the bonds themselves instead of tracking an index, and they may hold some high-yield (below investment-grade) issues. It costs 0.27% a year. That is below the 0.34% average for similar funds but well above the 0.03% charged by Vanguard Tax-Exempt Bond ETF (VTEB).
Price history
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TAXF -0.4% over the year to Oct 27, 2026, total return with distributions reinvested.
How it has behaved
| YTD | 1 yr | 3 yr | 5 yr | 10 yr | Since start | |
|---|---|---|---|---|---|---|
| TAXF official prospectus, to Dec 31, 2024 | — | +2.05% | — | +1.40% | — | +2.54% |
| S&P National AMT-Free Municipal Bond Index index, same period | — | +1.32% | — | +1.07% | — | +2.19% |
| TAXF price data to Oct 27, 2026 | -0.6% | -0.4% | +4.6% | +0.7% | — | +2.4% |
- Over the year to Oct 27, 2026, TAXF returned -0.4%, 6th of 8 among similar funds.
- Its 5-year annualized return was +0.7%.
- In the 2020 COVID crash it fell 13.4% and regained its old high 8 months after the low.
- Its worst full calendar year was 2022 (-9.6%); its best was 2019 (+8.7%).
- The deepest fall in its price history was 13.9% (Jul 19, 2021 to Oct 26, 2022), recovered by Sep 10, 2025.
Show as a table
| Year | Price data | Prospectus (official) |
|---|---|---|
| 2026 (to date) | -0.6% | — |
| 2025 | +4.3% | — |
| 2024 | +1.8% | +2.05% |
| 2023 | +7.3% | +6.52% |
| 2022 | -9.6% | -9.13% |
| 2021 | +2.7% | +2.88% |
| 2020 | +5.6% | +5.47% |
| 2019 | +8.7% | +8.79% |
| 2008 financial crisis stocks fell Oct 9, 2007 – Mar 9, 2009 | Before this security existed |
|---|---|
| 2020 COVID crash stocks fell Feb 19, 2020 – Mar 23, 2020 | Lost 12% over that stretch · deepest drop along the way 13.4%, back to its old high 8 months after the low |
| 2022 bear market stocks fell Jan 3, 2022 – Oct 12, 2022 | Lost 11.4% over that stretch · deepest drop along the way 12.7%, back to its old high 23.9 months after the low |
Dividends and income
Show as a table
| Year | Per share | Change |
|---|---|---|
| 2026 (to date) | $1.4600 | |
| 2025 | $1.8400 | +8.2% |
| 2024 | $1.7000 | +14.1% |
| 2023 | $1.4900 | +47.5% |
| 2022 | $1.0100 | +14.8% |
| 2021 | $0.8800 | -24.8% |
| 2020 | $1.1700 | -15.8% |
| 2019 | $1.3900 |
What's inside
As of Aug 31, 2026, the fund held 791 securities; the ten largest made up 6.33% of assets.
| Holding | Weight | |
|---|---|---|
| Public Finance Authority Bonds and notes | 0.88% | |
| RIVERSPRING HLTH SENIOR Bonds and notes | 0.88% | |
| United States Steel Corp Bonds and notes | 0.72% | |
| Missouri Housing Development Commission Bonds and notes | 0.65% | |
| Puerto Rico Sales Tax Financing Corp Sales Tax Revenue Bonds and notes | 0.57% | |
| New Jersey Higher Education Student Assistance Authority Bonds and notes | 0.57% | |
| ILLINOIS STATE TOLL AUTHO RITY Bonds and notes | 0.54% | |
| Black Belt Energy Gas District Bonds and notes | 0.54% | |
| Southeast Alabama Gas Supply District Bonds and notes | 0.53% | |
| Omaha Airport Authority Bonds and notes | 0.46% | |
| Orlando Utilities Commission Bonds and notes | 0.45% | |
| CHF - WILMINGTON LLC Bonds and notes | 0.44% | |
| Energy Southeast A Cooperative District Bonds and notes | 0.41% | |
| City of Temple TX Bonds and notes | 0.40% | |
| Patriots Energy Group Financing Agency Bonds and notes | 0.39% |
By country
United States 97.9%Puerto Rico 0.9%GU 0.3%United Kingdom 0.29%By issuer
Municipalities 99.39%The bonds mature in 17.2 years on average (weighted by size), with an average coupon of 4.81%.
Source: N-PORT holdings report as of Aug 31, 2026. Cash, money-market funds and derivatives are shown separately from the securities list.What changed recently
- Over the three months to Aug 31, 2026, investors added a net $37.8M (creations minus redemptions, per the N-PORT report).
- Monthly total returns reported for that quarter: +0.92%, -1.68%, -0.23%.
How it works
TAXF is actively managed and does not track an index. American Century's portfolio managers choose bonds to produce current income exempt from federal income tax. Under normal conditions, at least 80% of net assets go into municipal bonds, the debt of states, cities and public agencies. Some of their interest may still be subject to the federal alternative minimum tax (AMT), a parallel tax some investors owe.
The fund invests mainly in investment-grade (higher-rated) bonds. The managers may also hold high-yield (junk) bonds, unrated bonds and bonds in default. The fund's average duration, a measure of how sharply bond prices react to rate changes, is not fixed. It shifts with the managers' interest-rate forecast. The managers also look for price gains, such as bonds that could rise if rates fall or an issuer's credit rating improves. Trading decisions weigh rates, credit quality, comparable alternatives, trading costs and tax effects.
As of August 31, 2026, the fund had 791 holdings with an average maturity of 17.2 years, and its 10 largest made up 6.33% of assets. Large traders add or remove ETF shares through creations and redemptions, and this fund may settle those in cash instead of bonds. That can force it to dispose of bonds and realize taxable gains, making it less tax-efficient than some ETFs.
What it really costs
- TAXF charges 0.27% a year, versus an average of 0.34% for the similar funds below (4th of 8, cheapest first).
- Of that, 0.29% is the management fee; the rest covers other fund expenses.
- The fee includes a 0.02% waiver from the adviser, which may end.
- Using the prospectus's standard example, $10,000 invested would cost about $28 in the first year and $367 over 10 years (assuming a 5% annual return).
| Cost of $10,000 (SEC example) | 1 yr | 3 yrs | 5 yrs | 10 yrs |
|---|---|---|---|---|
| TAXF | $28 | $91 | $161 | $367 |
Structure and tax notes
- Bond prices move opposite to interest rates; the longer the maturities it holds, the more its price reacts to rate changes.
In a retirement portfolio
TAXF pays monthly income that is generally free of federal income tax, and that is its stated objective.
TAXF pays income every month. Its trailing 12-month yield was 3.95% as of October 27, 2026, and that interest is generally exempt from federal income tax. It has swung much less than stocks, but it is not risk-free. It fell 13.4% in March 2020 and took about eight months to recover. Its deepest drop was 13.9%, from July 2021 to October 2022, and it did not fully recover until September 10, 2025, about 34.5 months later. Its worst calendar year was 2022, when it lost 9.13%. The fund launched in 2018, so it has no record from 2008. Anyone who had to sell shares for spending money during 2022 would have locked in losses. Annual costs are 0.27%, which works out to $28 in the first year on $10,000 under the SEC's standard example. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.
Who it may suit — and who should look elsewhere
May suit
- Investors in higher tax brackets who hold bonds in taxable accounts and want monthly income that is generally free of federal income tax.
- People comfortable with active management and some high-yield muni bonds, at 0.27% a year against a 0.34% average for similar funds.
- Income investors who can sit through drops like the 13.9% fall from July 2021 to October 2022 in exchange for longer-maturity yields.
Look elsewhere if
- Cost-focused investors: Vanguard Tax-Exempt Bond ETF (VTEB) charges 0.03% a year, compared with TAXF's 0.27%.
- Investors filling IRAs or 401(k)s, where tax-exempt interest gives no extra benefit and taxable bonds often pay more.
- Anyone who needs steady prices: the 17.2-year average maturity makes the fund rate-sensitive, and its 2022 loss took nearly two years to recover.
Close alternatives
Matched by bond funds with the closest average maturity and issuer mix (N-PORT).
| Fund | Avg. maturity | Cost | Net assets | 1 yr | 3 yr |
|---|---|---|---|---|---|
| TAXF this fund | 17.2 yrs | 0.27% | $683.8M | -0.4% | +4.6% |
| FMB First Trust Managed Municipal ETF | 15.5 yrs | 0.65% | $2.05B | 0.0% | +4.3% |
| JMUB JPMorgan Municipal ETF | 16.7 yrs | 0.18% | $8.75B | -0.2% | +4.4% |
| TFI SPDR Nuveen Bloomberg Municipal Bond ETF | 15.1 yrs | 0.23% | $3.12B | -0.8% | +3.9% |
| HYD VanEck High Yield Muni ETF | 19.2 yrs | 0.32% | $4.43B | +0.9% | +5.5% |
| VTEB Vanguard Tax-Exempt Bond ETF | 14.5 yrs | 0.03% | $48.52B | +0.1% | +4.4% |
| BAB Invesco Taxable Municipal Bond ETF | 14.5 yrs | 0.28% | $900.7M | -2.4% | +5.8% |
| FMHI First Trust Municipal High Income ETF | 20.2 yrs | 0.7% | $994.3M | +0.2% | +5.8% |
Questions investors ask
Is TAXF tax-free?
Mostly at the federal level, but not entirely. At least 80% of the fund's net assets go into municipal bonds whose interest is exempt from federal income tax. Some of that income may still be subject to the federal alternative minimum tax. Because the fund holds bonds from many states, part of the income may be taxable at the state level. Any capital gains it distributes are taxable, and the prospectus warns that tax law changes could make some income taxable.
Does TAXF pay monthly dividends?
Yes. TAXF pays income monthly. Over the 12 months to October 27, 2026, it paid $1.92 per share, a trailing yield of 3.95% (income paid divided by the share price). The payments come mainly from bond interest. Its bonds carried an average coupon, or stated interest rate, of 4.81% as of August 31, 2026. Monthly amounts vary and are not guaranteed. The tax exemption generally matters more to investors in higher tax brackets.
What is TAXF's expense ratio?
TAXF charges 0.27% a year, according to the prospectus filed December 29, 2025. The figure, known as the expense ratio, reflects a 0.29% management fee minus a 0.02% fee waiver. In the SEC's standard example, $10,000 invested at a 5% annual return would incur $28 in costs over one year, $91 over three years, $161 over five and $367 over 10. The 0.27% fee is below the 0.34% average for similar funds but above Vanguard Tax-Exempt Bond ETF (0.03%) and JPMorgan Municipal ETF (0.18%).
What's the difference between TAXF and FMB?
The main differences are cost and size. First Trust Managed Municipal ETF (FMB), the closest match by average maturity and issuer mix, charges 0.65% a year versus 0.27% for TAXF. FMB had about $2.05 billion in net assets as of July 31, 2026, while TAXF had about $684 million as of August 31, 2026. TAXF's bonds were slightly longer, averaging 17.2 years to maturity against 15.5. Three-year average annual returns through October 27, 2026, were similar: 4.6% for TAXF and 4.3% for FMB.
Has TAXF beaten its benchmark?
Yes, modestly, through December 31, 2024. The prospectus shows average annual returns of 2.05% over one year, 1.40% over five years and 2.54% since the September 2018 launch, versus 1.32%, 1.07% and 2.19% for the S&P National AMT-Free Municipal Bond Index. Losses have been real, though. The fund fell 9.13% in 2022, and its deepest decline, 13.9% from July 2021 to October 2022, was not fully recovered until September 2025. In the 12 months to October 27, 2026, it lost 0.4%.